E-DRUG: Indemnification of patent liability in WB bidding document? (4)
-----------------------------------------------------
Rob:
The World Bank typically includes these kinds of indemnity clauses in its
Standard Bidding Documents in order to help ensure that the borrower (the
government) will not be prevented from carrying out the financed project due to financial costs resulting from patent or other litigation with respect to the goods that it has financed. But that is not the end of the story for the government (nor for the World Bank, for that matter).
I assume from your email that you work as a consultant for the government of Suriname. The government has an interest in making sure that there will be no violation of existing patents in Suriname for any medicines for which it is putting out an international tender.
First, if there should be a patent infringement (at least in the opinion of
the patent holder), the patent holder (or its licensee) will sue the
government if it is the importer. That entails both direct and indirect
costs for the government agencies involved.The government may be able to
implead the supplier if that mechanism exists under Suriname law, in which
case the government might principally rely on the supplier to defend the
case, but it is more likely (both in law and in practice) that the
government would have to wait until it has litigated the case before it
could have recourse to the supplier under the indemnification clause. If the supplier refuses to indemnify the government, then the government would need to sue the supplier. If the supplier has no presence (and assets) in Suriname, that means litigating overseas, an unattractive and costly proposition.
In addition to actions for infringement, which result in monetary damages,
the patent law in Suriname may also provide for injunctive relief, which
could stop the actual importation and/or use of the medicines already
imported. So, the clause in the bidding documents used by the government
would not be terribly helpful from the standpoint of getting the medicines
to the patients. And the World Bank's purpose, to make sure that the project it is financing gets properly executed (which in this case means that the medicines it is financing reach the patients), will also be frustrated.
So, a hands-off attitude to medicine patents on the part of the government
is not terribly helpful.
It is likely that part of the reason why the Word Bank includes the
indemnity clause you refer to in its Standard Bidding Documents for Health
Sector Goods is that medicine patents are difficult to identify. Pharma
companies do not disclose what patents they hold where. Governments (and
their medicines procurement agencies) may not have sufficient human and
system resources to do good patent searches in all cases. So there is risk.
The indemnity clause tries to shift the cost of that risk to the supplier,
but this also has consequences. If the supplier who could offer the lowest
price is not familiar with the Suriname market it may not participate in the tender (to avoid the potential liability), or it may price its bid higher to incorporate the risk factor. Either way, not the most efficient outcome for the country.
The situation could be much improved, and the market would operate much more efficiently, by legislation (and/or regulation) that makes the patent system substantially more transparent (both with respect to filings and with respect to grants of patents). In the meantime, the government medicines procurement agency would be well advised to exercise caution and to try to ascertain the patent status of medicines it seeks to procure. It is, after all, in a much better position to do so than suppliers in, say, India. While in practice the government's procurement experts have probably a good sense of what medicines may be under patent, it would be foolhardy to rely on the indemnification clause to purchase a generic form of one of the big blockbuster drugs -- you can be sure that the patent holder would come down on the procurement agency like a ton of bricks.
Please note that I have not looked into the relevant legislation in
Suriname, and this response is not intended as legal advice.
Disclosure: Prior to my retirement from the World Bank in 2006, I was, among other things, Chief Counsel for Latin America and the Caribbean, and I have advised the World Bank and its clients on procurement matters relating to medicines.
Cheers,
Rudy Van Puymbroeck
Rudolf V. Van Puymbroeck, J.D., M.B.A., Lic.
Adj. Assoc. Prof., School of Nursing & Health Studies,
Senior Scholar, O'Neill Institute for National and Global Health Law,
Georgetown University
St. Mary's Hall (213)
rvv@georgetown.edu
rvanpuymbroeck@gmail.com